A coworking space lease agreement is a document permitting a tenant, whether a business or individual, the right to use shared office space in exchange for compensation. In a coworking arrangement, the tenant anticipates other businesses and workers using the space.
Unlike traditional office leases, coworking space agreements only make the tenant responsible for the rent. In most cases, they don’t have to pay for utility costs and other renting-related fees.
Is a Coworking Space Agreement a Lease?
In many cases, you can define a coworking agreement as a lease. However, it depends on the lease terms, renewal options, and defined space. For example, if the document defines the tenant’s location or seats in the space within its terms and conditions, it could indicate that the coworking service agreement complies with the definition of a lease.
Please speak with a real estate professional, accountant, or legal expert for a definitive answer.
Do Leases Go on the Balance Sheet?
If you enter a coworking lease agreement as part of a business, you must record any lease over 12 months on your company’s balance sheet (ASC 842). Please note that if the lease term is less than 12 months, you don’t have to record it on the balance sheet. Instead, you can simply record the cost as an incurred expense.
What Is a Coworking Tenant?
A coworking tenant is an individual or business that works in a common area and shares desks and other workspaces with other tenants. They frequent this space regularly so they can have a consistent working environment.
Without this type of space, they may need to work from their homes, coffee shops, or other establishments that aren’t exclusively dedicated to focused work. A coworking space may have freelancers, independent contractors, small businesses, startups, nonprofit organizations, and corporate employees working in the same areas.
Solution for Remote Work
Coworking spaces offer a convenient solution for remote workers. As long as remote workers follow their company’s work-from-home policy, they can rent these spaces to get their work done.
Types of Coworking Spaces
Consider the types of spaces that coworking contracts may detail:
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Open Coworking Spaces:
- Hot Desks: Hot desks are workstations that aren’t assigned to any particular tenant. Individuals can use these empty desks on a first-come, first-serve basis. They usually must give up their desk after a certain number of hours or at the conclusion of the work day.
- Dedicated Desks: A dedicated desk is a space only one tenant can use. It lets them keep their belongings and equipment within the space (as long as adequate security measures are in place), as no one else will have permission to use it. The coworking space operator is responsible for enforcing their dedicated workspace.
- Private Offices: A private office is a space only one tenant can access. A business tenant rather than an individual tenant usually rents this type of coworking space and has employees work there.
- Shared Workspaces: A shared workspace is an area multiple tenants use simultaneously. Tenants claim the available space, including desks and tables, on a first-come, first-serve basis. They may have access to shared amenities like a business address for receiving mail, internet, coffee, and conference rooms.
- Virtual Office Spaces: Virtual office spaces let business tenants access mail handling services and a professional business address. Occasionally, they may have access to amenities like hot desks and meeting rooms. Small businesses wanting to establish professionalism may use this option so they don’t have to rent a physical office.
Types of Coworking Agreements
Here are the types of coworking agreements a business tenant can enter:
- By square footage: The tenant pays for the use of offices and amenities, depending on how much space the coworking space provider grants them.
- Monthly membership: The tenant pays a set monthly or weekly fee for consistent access to a dedicated workspace or common areas.
- Hourly rate: The tenant checks in and out of the premises, paying an hourly rate for the time they spend there.
What to Include in a Coworking Space Lease Agreement
A typical coworking agreement includes the following elements:
- Parties: The tenant’s (whether a business or individual) and the landlord’s names, addresses, and contact information.
- Premises: A description of the space the tenant will be allowed to use, whether a common area or a designated office/workspace.
- Services: A list of services the landlord will provide, including utilities, cleaning/maintenance, and internet.
- Amenities: A list of amenities the landlord will provide, including kitchen access, conference rooms, coffee makers, and office supplies.
- Lease terms: The lease’s start and end dates and options for renewing it once it expires.
- Payment terms: The amount, frequency, and due date of rent payments, the security fees, and fees associated with late payments.
- Usage policies: The rules the tenant must follow for using the space, including booking procedures for meeting rooms, operating hours, noise level policies, and guest regulations.
- Access and security: The guidelines for accessing the building and individual rooms and the responsibilities of replacing lost keys or access cards.
- Alterations and customizations: The rules for how tenants can alter or customize their working spaces.
- Insurance and liability: The insurance requirements for both parties and who will be liable if personal injury or property damage occurs.
- Data security and confidentiality: The protocols the landlord implements to protect the tenant’s sensitive business data while the tenant uses the provided space.
- Dispute resolution: The processes for resolving disputes between individual tenants or the coworking company and the tenants.
Co-Working Space Lease Agreement Sample
Download a co-working space lease agreement template in PDF or Word format below:
Frequently Asked Questions
What are the benefits of a coworking space?
A coworking space offers the following benefits:
- Grants tenants access to flexible space solutions, letting them only pay for the area and amenities they need
- Fosters community and collaboration with other tenants
- Enhances tenants’ productivity and professional image by granting them a fully equipped workspace
- Offers fully furnished spaces for tenants who may not want to commit to a long-term working environment
What’s the difference between a coworking space lease agreement and a traditional office lease agreement?
Explore the differences between these leases in terms of several factors:
- Flexibility: Coworking contracts are usually shorter-term, while traditional office leases are longer-term (starting at one year and often extending into three, five, or ten years).
- Amenities: Coworking contracts come with services and amenities, while the tenants of traditional leases must often organize their own services and amenities.
- Community and networking: Traditional leases offer private workspaces, while coworking arrangements allow for interaction between the various tenants.
- Branding and customization: A traditional lease lets the tenant customize their space to their unique brand within certain limitations. On the other hand, a coworking contract demands the tenant to leave the space as-is, making it flexible for various users.
How profitable is a coworking space?
A coworking business can be profitable, depending on various factors. Some factors affecting how much coworking space operators make include operational costs, pricing strategies, occupancy rates, locations, and the value-added services they provide.
Are coworking spaces the future?
Coworking spaces are likely not going anywhere, and many people anticipate they’ll continue to be a significant aspect of future work. Their popularity may remain because of increased remote/hybrid work, the rise of the freelancing and gig economies, and the corporate adoption of flexible work environments.